After a brutal rebuff at Salzburg, Theresa May must shift Brexit policy and reunite her party

President Tusk’s verdict after meeting with the assembled leaders of the EU27 at Salzburg was brutal. Perhaps it wasn’t anything that EU figures hadn’t already said before. But it left little room for doubt. The economic aspects of the Prime Minister’s Chequers plan, he said, “will not work”. This was a major setback. Number 10’s entire Brexit strategy is now teetering on the edge.

What now? Theresa May needs to face the assembled membership of her party in less than a fortnight. At one level, after her disastrous Conference speech last year, her team could chalk up a victory if the letters of the slogan stay on the wall and she delivers the words without her voice failing or being handed a P45. But, more seriously, she faces a difficult audience, bruised by Downing Street’s botched handling of Chequers. Her authority will be further challenged by former Cabinet ministers openly campaigning against her.

The Prime Minister needs to use the Salzburg summit as an opportunity. She has to seize the moment to shift her Brexit policy. There’s now a chance to bring the Conservative Party back together again and repair the fissures which have appeared since Chequers. What she cannot do is try to claim that “nothing has changed”. It’s time to get out the red marker pen and redraft her speech for Conservative Party Conference and to use it to rally the country behind her.

In her speech, the Prime Minister needs to own her own decisions. She should level with the audience, saying that she recognises that the Chequers policy was difficult for the Conservative Party. She should acknowledge that she didn’t explain the plan well. But she should also argue that she put it forward in good faith – believing that it was a credible plan to protect UK manufacturing industry and to keep the Irish border frictionless. It also took account of the simple fact that there is no Conservative majority in either house of Parliament.

Unfortunately, Theresa May should continue to say, the EU doesn’t seem interested in the sort of deep partnership with the UK for which Britain had hoped. The implication – and this should be implicit, not explicit – is that EU intransigence will come as little surprise to those who voted Leave precisely to escape the obduracy of Brussels.

So given that the EU has rejected a deep economic partnership based around Chequers, the Government will now have to consider other options, including a looser relationship with our neighbours. Theresa May can say she is not wedded to the minutiae of the details of her Chequers plan but to a pragmatic solution which works in Britain’s interests. By tabling a credible plan to address the Irish border, the EU’s lack of an alternative comprehensive and sustainable plan is clear for all to see.

The Prime Minister should tell the Conference that Chequers was the high water mark of the compromises she could offer for a long-term relationship. And she needs to explicitly say that she recognises Chequers cannot go forward in its current form. She should use the opportunity to ditch some elements of it – above all the fanciful Facilitated Customs Arrangement. If, as I’ve repeatedly heard senior European figures argue, technology can ultimately be used to address the Irish border, she should commit to a revised version of the Maximum Facilitation option which she mistakenly ditched before the summer. This might mean a longer period in a customs unions, after the standstill transition ends in 2021, but the end destination would work better for both sides.

The Prime Minister needs to be more honest about the trade-offs inherent with leaving the EU. To Brexit supporters, she should say: I know you disliked Chequers but I believed it was important to put forward a generous and serious offer to the EU. To Remain backers, she should argue: I tried to reach a compromise but Brussels – and some European capitals, in particular Paris – don’t seem to want to listen. To the country, she should promise to keep seeking a new relationship with the EU based around a free trade area which gives Britain a uniquely close relationship after Brexit.

Yesterday Theresa May appeared genuinely angry. It’s little surprise when European leaders seemed to have tried to go out of their way to humiliate her. The evening before she had been given just ten minutes to set out her Brexit vision. It’s as if the EU is determined to convince itself they have more pressing things to discuss than the departure of its major defence and security player, equivalent in size to its 19 smallest economies put together.

The President of the European Council seemed to delight in trolling Theresa May on Instagram. Meanwhile, two EU leaders came out backing a second referendum and the French President decided to insult the British electorate. It’s hard to reconcile all this with the purring description of Chequers as a “game changer” by her Brexit Sherpa, Olly Robbins, just days before on the BBC’s Panorama.

Salzburg puts us well and truly in the brinksmanship phase of Brexit where the EU seems willing to play ‘chicken’ with the economic and geo-strategic interests of the continent. European leaders have thrown the Prime Minister’s hard-won and painful compromise proposal back in her face, but offer no solutions of their own.

At this point the biggest risk of a no-deal Brexit comes from the EU’s stubborn inability to compromise. And the ultimate irony is that a failure to reach agreement on a backstop designed to prevent a hardening of the Irish border, is now the most likely cause of a no-deal exit and a possible hardening of that same border.